Bombardier, Inc., announced on Aug. 4 that it was purchasing Adtranz from DaimlerChrysler AG, making the Canadian firm the world's largest manufacturer of passenger railcars and electric locomotives. It had previously been No. 3 behind Alstom and Adtranz.

The $711 million deal allows DaimlerChrysler to spin off a financially-troubled unit and focus on its core business of producing motor vehicles. Analysts consider the price to be a bargain, equal to less than 23% of Adtranz's 1999 revenue of $3.2 billion. The firm has been in the red for the past four years, although this year losses have been significantly reduced. It recently announced a massive cost-cutting program, including the closing of six plants, including one in Elmyra, N.Y. A condition of the sale is that Adtranz break even this year; if it doesn't, the price goes down, although the formula is being kept confidential.

Bombardier's volume of railcar manufacturing operations will be more than doubled once the deal is finalized, giving it plants in 23 countries staffed by 38,000 employees. Its annual rail-related revenue will be an estimated $7.6 billion (up from $2.2 billion), and its backlog will total a staggering $14.5 billion.

Bombardier is already the world's third-largest producer of civilian airliners, behind Boeing and Airbus Industrie, concentrating on smaller regional jets. Up to now, it has never built electric locomotives, although it is jointly manufacturing with Alstom the Acela Express power cars and HHL electric locomotives for Amtrak. There have already been hints that Bombardier may reconsider a plan to market high speed trains in North America in partnership with Alstom.

Adtranz, based in Berlin, is known for its contribution to Germany's high speed InterCityExpress trains and for subway cars and airport people-mover systems. Bombardier Transportation President and CEO Jean-Yves Leblanc said his company is now "a flail-fledged integrated player [able] to compete across the entire product line. Our access to complementary technologies, such as propulsion systems, train control and communications systems, and electric locomotives, will enhance our ability to compete vigorously in all markets."

Other Bombardier executives said they are confident the former Adtranz operations can be made profitable, in part through the sale of its fixed-installation and signaling divisions. Talks were under way in early August with potential buyers. Completion of the deal will require anti-trust approval in both Europe and the U.S.